MILAN -- Fiat SpA is in talks with General Motors Corp. about an alliance in which the U.S. auto maker would take a 20% stake in the Italian group's car unit as part of an industrial partnership, people familiar with the situation said.

Meanwhile, DaimlerChrysler AG is looking to break up those discussions and lure Fiat away from its American rival with an offer of its own, these people said. At the same time, Fiat is considering...